The End of Contract Period – What you need to Know

For one reason or another, you and one of your employees may have to part ways. Even if the decision has been made under amicable circumstances the paperwork that follows can still be a headache. Here are a few simple steps that can help guide you through the end of contract period.

When the contract will not be renewed

If the worker has been in the company for more than 6 months the employer needs to give a 15-day notice if he plans not to renew the contract. This must be a written notice which includes details of all the documents and payments that the employee will receive on the last day of work.

Payments to the employee on the last day of work:

Pending Salary

Un-taken holiday pay

Redundancy payment (Finiquito) The redundancy payment is 9 days per each year employed by the company.

Documents the employee should receive on the last day of work:

Latest wage-slip

Redundancy report where all categories of payments are specified.

“Certificado de empresa” where the last 6 month contributions to Social Security are listed.

Disciplinary measures

A contract may be terminated due to gross misconduct or disrespecting the rules of the company despite repeated warnings. Here are some examples:

Repeated and unjustified absences or tardiness

Abusing the good faith contractual relationship that the employee has with the employer

Stealing from the company

Lack of discipline or disobedience at the workplace

Verbal or physical offenses directed toward the company or its employees or their families

Participating in the continued, voluntary reduction in the employee’s regular work

Habitual drunkenness or drug use if either negatively affects the employee’s work

Terminating a contract for disciplinary reasons is a delicate issue so care must be taken to follow all of the legal guidelines. The reasons for termination must be clearly stated, and these reasons must be valid enough that they would be accepted if the situation goes to court. It would be wise to have that possibility in mind when you decide to take this action so make sure you have evidence of the misconduct i.e. witnesses, documentation of the offense, video recordings etc.

In serious cases, you must explain the facts in writing to the employee including the date which the dismissal will take effect. This must be done within a maximum period of two months (60 days) from the date of the offense which leads to the termination of the contract.

A notification period is not required and no redundancy payments.

Dismissal for justified reasons other than disciplinary

A one month notice must be issued to the worker in writing and specifying the reasons for the dismissal.

The causes for the objective dismissal are:

Ineffectiveness of the worker: This is controversial and is rarely used since it is difficult to demonstrate the ineptitude of an employee before a court. Sometimes an employer uses this as a means to fire an employee when he no longer wants them within his company.

Lack of adaptation to modifications: An employee may not be able to adapt to new technical innovations that have been implemented into the workplace. If the situation persists even after receiving sufficient support and education, if two months have passed since the introduction of the new technology, the employee may be dismissed. As an example, a certain number of petrol station operators were let go when they could adapt to the computerization of the service.

Work absenteeism: Absenteeism means, for example, more than two consecutive days of unexcused absence in the workplace.

Need to amortize jobs: For economic, technical, organizational or production reasons. This is the argument most used by the employer to lay someone off, and must objectively credit the need to reduce costs to maintain the business and that by dispensing with the worker will produce real savings in the company.

Dismissal with no objective reason ( “Despido improcedente “)

The first step is to communicate to the employee in writing the facts and the dates of the dismissal. Once this is done the worker has a 20-day period where he has the right to sue the employer.

Sometimes the worker is verbally told that he is denied access to his job. These types of dismissals are irregular and any judge will impose the compensation provided for the dismissal inadmissible.

When the worker has filed a claim for the dismissal he has suffered, the Judge may classify the dismissal as follows:

Null dismissal: It is understood that the reason for the dismissal is due to some form of discrimination or is a violation of the fundamental rights of the worker. The employer must readmit the worker immediately and pay the salary equivalent to the duration of the litigation.

Dismissal: The judge considers that the employer has established sufficient evidence of the cause of disciplinary dismissal and this entails the termination of the contract with the employee without any compensation.

Unfair Dismissal: This is when the dismissal does not meet all the formal requirements.

In this situation, the employer has the option to readmit the worker or pay compensation of 45 days of salary per year worked, up to a maximum of 42 monthly payments.

Are you considering terminating the contract on one of your employees? Contact us for more information: info@limitconsulting.com